Exchange-Traded Products: SEC Requests Comments on Topics Related to the Listing and Trading of Exchange-Traded Products on National Securities Exchanges and Sales of Such Products by Broker-Dealers

Sullivan & Cromwell LLP - June 17, 2015

The Securities and Exchange Commission recently published a request for comment on topics relating to its oversight of exchange-traded products under the Securities Exchange Act of 1934, and particularly the listing and trading of exchange-traded products on national securities exchanges and the sales of such products by broker-dealers.

In the request for comment, the SEC states that it is soliciting public comment to help inform its review of the listing and trading of new, novel or complex exchange-traded products, including requests for exemptive and no-action relief under the Exchange Act and filings by exchanges to adopt listing standards applicable to exchange-traded products.  In addition, the SEC invites views on the manner in which broker-dealers market ETPs to investors and on the extent to which broker-dealers fulfill their obligations to investors when they recommend and sell exchange-traded products, particularly to retail investors.  The SEC also seeks comment on investor understanding of the nature and uses of exchange-traded products, particularly that of retail investors.

In the Release the SEC focuses particular attention, and requests specific comment, on issues relating to:

  •  Arbitrage and market pricing of exchange-traded products;
  • Exemptions and no-action positions under Regulation M, Section 11(d)(1) of the Exchange Act and Exchange Act Rules 10b-10, 11d1-2, 14e-5, 15c1-5 and 15c1-6;
  • Exchange-traded product listing standards;
  • Broker-dealer sales practices and investor understanding and use of exchange-traded products; and
  • Other topics, including the consequences of closure and liquidation or termination of an exchange-traded product; likely future developments in the market for exchange-traded products; growth of the market capitalization of exchange-traded products; and the research, tools and metrics provided by the SEC on its Market Structure Data and Analysis website.